Why Apple and Samsung aren't rivals after all

Apple doesn’t make the iPhone itself.

It neither manufactures the components nor assembles them into a finished product. The components come from a variety of suppliers and the assembly is done by Foxconn, a Taiwanese firm, at its plant in China.

The “teardown” part of this graphic shows who makes what inside the iPhone, and how much the various bits cost.

Samsung turns out to be a very important supplier. It provides some of the phone’s most important components: the flash memory that holds the phone’s apps, music and operating software; the working memory, or DRAM; and the applications processor that makes the whole thing work.

These account for 26 per cent of the component cost of an iPhone.

This puts Samsung in the unusual position of supplying a significant proportion of one of its main rival’s products, since Samsung also makes smartphones and tablet computers. This is actually part of Samsung’s business model: acting as a supplier of components for others gives it the scale to produce its own products more cheaply. For its part, Apple lets other firms handle component production and assembly, which leaves it free to concentrate on product design.

Stranger still, Apple sued Samsung in April over the design of its Galaxy S smartphone and its Galaxy Tab tablet computer, claiming that they copied hardware and design features from Apple. Samsung counter-sued. But the two firms’ mutually beneficial trading relationship continues.

The “total cost” part of the graphic shows that, beyond manufacturing and component charges, the lion’s share of the iPhone’s $560 price tag goes to Apple. Apple also became the world’s largest supplier of smartphones in the second quarter with Samsung in second place.

So although Apple does not actually make the iPhone, it certainly makes a lot of money from it.